Financial inclusion, integration, and stability asymmetries in the Mediterranean region

Abstract

Using Panel data, GMM and GLS econometric models, and a sample of six Mediterranean (MED) countries (Algeria, Egypt, Jordan, Lebanon, Morocco and Tunisia) over the period 2002–2023, this paper assesses empirically the impact of financial inclusion on income inequality, poverty, and financial stability asymmetries in the MED region. While the empirical literature covering the region is relatively scarce, this paper adds to that literature by bridging a significant existing gap, especially in the aftermath of the recent financial and debt crises and the recent political and social turmoil that have been unfolding in several MED countries. Our empirical results show that financial inclusion decreases inequality but has no significant effect on poverty. Other empirical results show that while the empirical evidence indicates that enhanced financial integration is a contributing factor to financial instability in the MED region, an increase in financial inclusion and in population contributes positively to financial stability.